Alaska Commercial Real Estate Market Trends Analysis

Industrial real estate means commercial properties that are usually rented by Business to Business (B2B) companies. B2B companies either make or distribute products to other manufacturers or retailers.

However, today, there is a growing number of industrial buildings whose tenants are online order fulfillment centers that deliver items straight to the customer.

Industrial property investors will keep the asset long-term and serve as the landlord. Their investment predictions depend on revenue from both lease and the planned sale of the property. Industrial leases can be structured on either gross or net rent terms.

Annual and 10 Year Population Growth

Industrial property investors have requirements for reliable population statistics that is specific to their kind of property investment. A shrinking populace has a less direct impact on industrial properties by way of a decreasing tax base. Industrial investors want to know that the market’s infrastructure is reliable and adequately maintained.

All property values, commercial as well as residential, are impaired in places that are losing citizens. The tenants for industrial properties require a reliable local workforce. Significant industrial tenants will turn down regions that are losing citizens.

Property Tax Rates

As we witnessed with apartment complex investments, tax rates are an accurate clue to the financial viability of a potential location. Stable tax rates are an indicator of a predictable environment for your investments.

You may want to learn more on commercial property taxation and commercial real estate tax reduction from our resources.

Accessibility

The tenants in industrial properties make or disburse large amounts of products that are big. Big tractor-trailer trucks are employed to ship these products. Industrial properties need to be adjacent to highways so that significant trucks can get to and from them without trouble.

Sometimes industrial businesses move their goods by planes or railway. This makes being close to an interstate, which usually takes traffic close to air and train hubs, a big bonus for industrial properties.

Utilities

Production facilities frequently require significant levels of power and water. If a property does not contain sufficient amounts of these utilities, some renters will search elsewhere.

Retail buildings are leased by tenants that sell products or services to the public. This includes single-tenant and multi-tenant buildings. Desirable tenants for single-tenant locations are pharmacies, auto equipment stores, banks, and restaurants.

Multi-tenant buildings can be two or 3 unit properties, small “strip” centers, significant “big box” or grocery store shopping centers with national anchor tenants. Centers that contain condos or apartments, offices, and retail shops are known as “lifestyle” shopping centers.

Retail lease agreements are “net” with tenants being responsible for the landlord’s tax, property insurance, and maintenance of common areas as additional rent. Retail tenants also have to maintain the property.

A retail investor will use the same demographic data that their desired renters employ to find a satisfactory investment asset.

Population Growth

The overall data for the community under consideration is not sufficient for retail investors. Investors also look at the market’s submarkets. Retailers have to be where their shoppers live, drive past, or are employed.

A trade area that doesn’t already have enough “rooftops” won’t do for retailers even if it is growing. Retail property investors want to review the current population growth, average annual population growth, decade population growth, and daytime population.

Median Income

National brands or “credit tenants” have very definitive site requirements that involve wage levels. Costly products necessitate customers with high incomes while lower end goods require lower income households.

Median Age

Age data is more critical to retail investors than alternative investor categories. If you need to identify and keep quality tenants, you will need to choose an asset that is situated close to their required age categories.

Property Tax Rates

The earlier description of the way property tax rate information is used by industrial and multifamily purchasers pertains to retail investors too. Bigger taxes equal larger rents which inflate vacancy rates, and markets with expanding tax rates often have shrinking property prices.

In a city that has elevated property tax rates, it’s even more important to make sure your property isn’t overestimated by the county. If so, the best commercial real estate attorneys in Alaska know how to protest property taxes.

Office properties lease working space to businesses. Office buildings could be a one story flex space or a multi story building. Major companies often rent office space from others rather than use their corporation’s cash to purchase or develop space.

The lease contract utilized for office tenants is a gross lease, occasionally referred to as a “full service” lease agreement. The rent includes the landlord’s anticipated costs for utilities, real estate taxes, insurance, and maintenance. This contract can be adjusted to meet the needs of the landlord and the renter.

These investors are long term investors who anticipate revenues from rental payments and the appreciation of the property.

Population

The specific demographic data that office property owners use demonstrates the number of desired office employees in the population. They search for the complete populace number, their ages, and their education. Knowledgeable office investors buy property in markets where their tenants need to work.

Property Tax Rates

A financially stable municipality that maintains a suitable living situation for office workers will maintain stable tax rates. A good workforce pool attracts good office tenants.

Incomes/Cost of Living

Income standards show a prospective renter whether workers in the community are qualified, under-qualified, or overqualified for their jobs. It can additionally reveal the salary standards that employers will need to pay.

Education

Office owners realize that the education achievements of the labor pool will be significant to their possible renters. A call center may not require college graduates, but an attorney services firm might.

Buy, rehab, rent, refinance, and repeat (BRRRR) is an investing plan that develops a portfolio of leased properties. It’s a Buy and Hold investment because the investor owns the asset for a long time. The investor collects lease revenue during their ownership and a one time amount when the property’s worth goes up, then they sell it.

After the property is bought and fixed up, it is rented to a tenant. As soon as they are able, the investor receives a “cash-out” refinance that enables them to take funds out of the asset in cash. This becomes the cash investment on their next investment, and they repeat it all again.

To buy and repair a commercial property, investors prefer unconventional loans. Traditional financing institutions avoid to finance such projects saying they are too risky.

However, lenders that might serve you can be found in this commercial real estate vendor directory containing the best Alaska commercial hard money lenders as well as the best commercial rehab lenders in Alaska.

Also, don’t forget about the professional knowledge of the top commercial and industrial real estate brokers in Alaska. Below is a list of stats a broker can advise you on.

Median Gross Rents

Investors have to know how much rent they can charge and if it is likely that rental rates will expand in the future. This can impact decisions regarding locations for investment and which properties to purchase.

Property Value Growth

If real estate values aren’t going up, a buy and hold investor gives up half of their investment strategy.

Population

BRRRR investors will analyze the populace growth rate. A growing populace means a dependable pool of tenants and is more likely to support rising real estate values.

Income

Multifamily property investors should find out the wage level of their potential renters. An asset that doesn’t meet the requirements of the community will have a high unoccupied rate.

Property Tax Rates

Expanding taxes can eat into your returns. Reliable tax rates are a sign of a vibrant, improving economy.

Additionally, in the local government’s register, your asset can be overassessed, which makes you pay unfair property taxes. If that is the case, you may benefit from the services of the best commercial property tax consulting companies in Alaska and the top-rated Alaska commercial property appraisers.

The real estate industry definition of development typically means complete residential neighborhoods or commercial ventures of just about every size. Developers need property that allows the development of homesites sold to homebuilders or commercial structures that are rented.

This involves acceptable zoning, land use design by civil engineers, construction plans for buildings, and permission of the local municipality. Once all of the work is properly done, the developer manages the building and marketing of the end product.

It could take a year or more from the start to finish of a development project. During that time, economic and regulatory shifts could influence the project’s revenue. For this reason, development is the most speculative category of real estate investing.

A project may get stopped by different factors causing a long delay before renewing development. If the builders are away from the site, the property can get damaged. The best commercial real estate insurance firms in Alaska help professional builders avoid losses resulting from such events.

Insurance should be included in your project costs when presenting it to a lender. The best commercial construction lenders in Alaska can suggest a list of firms they consider reliable.

Population

To make certain that their housing and commercial development ventures are situated in acceptable areas, developers utilize the same populace size, population growth, household incomes, and education level of the population that their end users want to have.

Income

Wage rates will tell developers whether the customers and diners in the market are the people that their tenants seek. Premium retailers hunt for upper income regions, whereas moderate priced retailers need middle class customers.

Businesses that rent office and industrial space utilize wage data as a sign of their labor costs in that location. Developers know this, and examine wage rates to project a location’s appeal for their preferred tenants.

Education

Companies that rent office and industrial properties hunt for different educational indicators in the region. Office property occupants often want potential workers with a college degree. Mid level employers are okay with high school graduates.

Age

Most developers prefer to see a young to middle-aged citizenry that supplies a stable tax base. A population that is still participating in the labor pool is preferred for office and industrial property projects. Involved employees and their households patronize stores and dining establishments that rent retail buildings.

Residential neighborhoods developers prefer the same age group because they are presumably upwardly mobile, which stimulates residential transactions.

Real estate loan note investors buy actual loans cheaper than the balance due and turn into the new lender. The original lender could be agreeable to selling because they want capital, or because the borrower is not current with their mortgage payments.

A portion of promissory note buyers will restructure the loan to help the borrower continue their debt payments — for a long-term income. The note buyer is covered by the mortgage note that the borrower signed and can recover the collateral if required.

Population

One of the most basic factors in real estate investing of all kinds is the size of the market’s populace and if it is expanding. Investors understand immediately if a market is a possibility by analyzing population stats.

Property Values

Expanding real property values are the most crucial sign when promissory note investors assess an area. The expanding value of the property lessens the liability of the investment.

Property Tax Rates

When property taxes rise too often, borrowers who have problems making their mortgage payments will find it difficult to stay current. This is bad for long-term investors, but good for the ones who expect to turn their investment around immediately through a sale of the asset.

A REIT (Real Estate Investment Trust) is a business that possesses and operates revenue generating real estate. They generate income from rent and build long-term property value.

REITs are obligated to distribute 90% of their net revenue in dividends which is attractive to a lot of investors. Small investors like REITs because they are able to sell their shares anytime.

REIT shareholders are considered passive investors which dictates that they have nothing to do with the acquisition or management of any assets.

REITs are sometimes bought by people wanting to shift focus from active to passive investing. They sell their own real estate to reinvest the proceeds into REITs.

A tax deferred exchange is created to benefit investors who consider doing so. Learn more about this by reading our guides: Exchanging Real Property into REIT Shares with IRC Sections 1031 and 721 along with Pros and Cons of a 1031 Exchange into DST.

For such kind of procedure, you will need to get help from a 1031 Exchange Qualified Intermediary. Find them in PropertyCashin’s directory of the best 1031 exchange companies in Alaska.

An additional investment choice that raises capital from individuals to invest in real property is a real estate investment fund. They don’t hold real property — they possess interest in companies that do, such as REITs.

Unlike REITS, funds aren’t required to distribute dividends. Similarly to other stock funds, the return is created by appreciation in the value of their stock.

Mutual funds, ETFs (exchange-traded funds), and high-end private equity funds are designated as real estate investment funds. Shareholders are allowed to unload their shares if they need capital, similar to REITs.

As they are passive investors, fund shareholders are not involved in any determinations such as property acquisitions.